How does a joint and survivor annuity work?


Joint and survivor annuities, also called joint and last survivor annuities, cover the lives of two or more annuitants both of whom receive payments until one of them dies.

Joint and survivor annuities should be distinguished from joint life annuities whose payments cease upon the first annuitant's death.

Basic Characteristics of Joint and Survivor Annuities

  • A specified monthly amount is paid while both annuitants are alive and the same, or lower, amount is paid after the annuitant's death for the lifetime of the survivor.
  • The survivor receives a certain specified survivor benefit ratio of the amount payable upon the first death. The survivor benefit ratio is typically chosen at the beginning of the payout phase, or when the contract is annutized. Thus, the annuity can be classified as a joint and 100% survivor, joint and two-thirds survivor or joint and 50% survivor option. 50%, 66%, 75% and 100% are most common survivor benefit ratios.

    Let us illustrate this with an example: under a joint and 66% survivor annuity paying a monthly benefit of $1,300 to the annuitant, the survivor would receive $858 monthly (66% of $1,300) after the annuitant's death.

  • A traditional joint and survivor annuity has a primary annuitant and a secondary annuitant, or beneficiary. The survivor benefit ratio is used to calculate the secondary annuitant's benefit only when the primary annuitant passes away. If the primary annuitant outlives the secondary annuitant, the benefit payments are not reduced.
  • A new, commercially available and currently very popular type of joint and survivor annuity has been introduced, which pays a reduced benefit to the survivor, regardless of whether the primary, or the contingent beneficiary, dies first. Furthermore, insurers tend to pay higher benefits under these new joint and survivor annuities, than on the traditional types of annuities.
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